In an effort to overcome the island’s bankruptcy over the last four years, Puerto Rico reached a tentative deal with multiple bondholder groups to reduce the debts owed by the central government.
The new agreement would take into consideration the substantial damage that the island’s economy incurred since the start of the coronavirus pandemic. The last debt-cutting deal that Puerto Rico reached was in February 2020, just weeks before the coronavirus pandemic hit Puerto Rican shores.
In terms of the new deal, owners of the island’s $18.8 billion of general-obligation and Public Buildings Authority debt would receive $14.4 billion in aid. This is over $3 billion more than the $15.6 billion that was promised as part of the previous deal.
Following the conclusion of negotiations, David Skeel, the chairman of the oversight board, made the following statement: “We achieved a fair, sustainable, and consensual agreement that puts Puerto Rico on a path to recovery and is an important tool to lift the weight of bankruptcy from the people and businesses of Puerto Rico.”
In order to reach its goal of ending its bankruptcy, Puerto Rico will need to not only enforce its latest agreement, but also remedy its unfunded pension system that currently owes $55 billion to both current and future retirees.
